223 F.

2d 413

Santiago ALBANESE D'IMPERIO, Plaintiff, Appellant,

v.
SECRETARY OF THE TREASURY OF PUERTO RICO,
Defendant, Appellee.
No. 4869.

United States Court of Appeals First Circuit.

June 6, 1955.

Orlando J. Antonsanti, San Juan, Puerto Rico, for appellant.

Manuel J. Medina Aymat, Asst. Atty. Gen., with whom Jose Trias Monge,
Atty. Gen., was on brief, for appellee.
Before MAGRUDER, Chief Judge, and MARIS * and WOODBURY,
Circuit Judges.
WOODBURY, Circuit Judge.

This is an appeal from a judgment of the Supreme Court of Puerto Rico

affirming a judgment of the Superior Court of Puerto Rico, San Juan Part,
which sustained administrative action resulting in the assessment of a
deficiency in income tax against the appellant for the calendar year 1949. Our
appellate jurisdiction under Title 28 U.S.C. 1293 is clear, for the appellant
contends in this court as he did in both insular courts that 24(b) of the Income
Tax Act of Puerto Rico, quoted in the margin,1 as applied to him, deprives him
of his property without due process of law in violation of the Constitution of the
United States,2 as well as in violation of Art. II, 7 of the Constitution of the
Commonwealth of Puerto Rico, 48 U.S. C.A. 731d note, and 2 of the
Organic Act of March 2, 1917, known as the Jones Act. 39 Stat. 951, 48
U.S.C.A. 737.

The case is presented to us on an agreed statement of facts which can be briefly

summarized. In January 1949, the appellant, a widower, and Iris de Juan, a
widow, both with minor children born of their previous marriages, entered into
an antenuptial agreement pursuant to the provisions of Book Fourth, Title III,

Chapter I of the Civil Code of Puerto Rico, 1930 ed., the pertinent sections of
which are quoted in the margin.3 They included in the agreement a complete
inventory of all their respective properties and by the agreement they undertook
to effect a complete separation, not only of the property each then owned, but
also of all property each might acquire in the future. Furthermore, in clause 6
they provided: "The parties hereby make known that having excluded from the
marriage they are about to contract, the regime of the legal conjugal partnership
(rgimen de la sociedad legal de gananciales), the property that during the
marriage each spouse shall acquire, shall be and become the property of each in
absolute dominium."
3

The parties married on January 27, 1949 in accordance with their agreement,
and in reporting their income for that year each filed a separate return and each
paid a tax calculated on his and her respective income. The Secretary of the
Treasury, however, took the position that 24(b) of the Income Tax Act quoted
above applied in spite of the antenuptial agreement. He, therefore, ruled that the
appellant should have reported both his and his wife's income in a single joint
return and paid a tax calculated on the total taxable income of both. Therefore
the Secretary assessed a deficiency against the appellant in the amount of the
difference between the tax due on his and his wife's combined income and the
tax actually paid by the appellant on his own personal income. The appellant
contested the assessment of his deficiency through the administrative remedies
provided by local law and on up through the Puerto Rican courts wherein, as
already pointed out, he raised the same federal constitutional question he
presents on this appeal.

Basically the appellant's contention is that the antenuptial agreement between

himself and his wife is clearly valid under local law (indeed, he says that there
is not even an iota of evidence that its purpose was to avoid taxes or that it was
in any respect a sham or subterfuge) and that, by its clear terms, the agreement
effected a complete separation not only of the properties but also of the incomes
of the spouses. Wherefore he says that to require him to pay a tax on his and his
wife's combined income is to require him to pay a tax measured by the income
of another which the Supreme Court held in Hoeper v. Tax Commission, 1931,
284 U.S. 206, 52 S.Ct. 120, 76 L.Ed. 248, violated the due process clause of the
Fourteenth Amendment.

The Supreme Court of Puerto Rico, relying heavily on its opinion in Ballester v.
Court of Tax Appeals, 61 P.R.R. 460 (1943), rejected this contention.

Although the Commonwealth of Puerto Rico, by direct inheritance of the law of

Spain, has always had a legal community property system, see Chapter IV of

Title III, Book Fourth of the Civil Code of Puerto Rico, 1930 ed., the court in
Ballester v. Court of Tax Appeals, supra, held that under its system of
community property the wife did not have a "vested interest" in income earned
by the husband or produced by community property. Wherefore it found
Hoeper v. Tax Commission, supra, readily distinguishable and held that under
the rule of United States v. Robbins, 1926, 269 U.S. 315, 46 S.Ct. 148, 70
L.Ed. 285, there was no constitutional impediment to applying 24(b) of the
Income Tax Act to require a husband to report and pay the income tax on the
entire net income of the conjugal partnership. This court affirmed. BallesterRipoll v. Court of Tax Appeals, 1 Cir., 1944, 142 F.2d 11, certiorari denied,
1944, 323 U.S. 723, 65 S.Ct. 55, 89 L.Ed. 581.
7

The Ballester case does not rule this one, for the spouses in that case married
under the traditional community property system and the taxpayer's position
was that as an incident of that system one half of the income of the community
"vested" in his wife and so could not constitutionally be taxed to him under the
rule of Poe v. Seaborn, 1930, 282 U. S. 101, 51 S.Ct. 58, 75 L.Ed. 239. In the
case at bar, however, the spouses married in accordance with an antenuptial
agreement excluding "the regime of the legal conjugal partnership" and
providing for a complete and final separation of their respective properties and
incomes, and the taxpayer relies upon the terms of that agreement to effect the
separation of his and his wife's respective incomes for income tax purposes.
Nevertheless, we agree with the Supreme Court of Puerto Rico that the result
reached in the Ballester case must also be reached in this one.

Certainly there is nothing in Hoeper v. Tax Commission, supra, if that case still
speaks with authority, see Ballester v. Descartes, 1 Cir., 1950, 181 F.2d 823,
829, to indicate the existence of any constitutional limitation on the power of
the Legislature of Puerto Rico, or for that matter of a State in the federal union,
to enact legislation forbidding spouses from thereafter escaping the normal
income tax consequences of their marital relationship by contractual
arrangements entered into either before or after their marriage. And we think
the local statutes have precisely this effect.

The reason for our conclusion can be briefly stated. It is that 1268 of the Civil
Code, quoted in footnote 3 supra, specifically provides that the parties to
antenuptial contracts "can not stipulate anything contrary to law," and if they
do, that provision of their contract "shall be considered void," and 24(b) of the
Income Tax Act, making a husband and wife living together a unit for income
tax purposes had been the "law" in Puerto Rico for some nine years before the
appellant and his wife entered into their antenuptial agreement. Thus, while
their antenuptial agreement is no doubt valid under local law for many

purposes, we do not think that local law permits it to have any validity as a
device to divide their respective incomes for income tax purposes. And, as we
have said, we are not aware of any constitutional limitation on the power of the
Legislature to forbid, at least prospectively, contracts between a husband and
wife altering the normal income tax consequences of their marriage.
10

The Supreme Court of Puerto Rico was not concerned, nor are we, with the
question whether the same result would be reached with respect to an
antenuptial agreement like the present which had been entered into prior to the
enactment of 24(b) of the Income Tax Act. We express no opinion on that
question.

11

The judgment of the Supreme Court of Puerto Rico is affirmed.

Notes:
*

By special designation

Act No. 74 of August 6, 1925 as amended by Act No. 31 of April 12, 1941,
effective January 1, 1940
"If a husband and wife living together have a net income for the taxable year of
$2,000 or over, or an aggregate gross income for such year of $5,000 or over,
the total income of both shall be included in a single joint return, and the normal
and additional tax shall be computed on the aggregate income. The net or gross
income received by anyone of the spouses shall not be divided between them."

In this case as in Mora v. Mejias, 1 Cir., 1953, 206 F.2d 377, 382, we do not
find it necessary to decide whether the due process clause of the Fifth
Amendment or that of the Fourteenth Amendment is applicable for: "The
restraint imposed upon [tax] legislation by the due process clauses of the two
amendments is the same." Heiner v. Donnan, 1932, 285 U.S. 312, 326, 52 S.Ct.
358, 361, 76 L. Ed. 772

"Section 1267. Persons who may be joined in matrimony may, before

celebrating it, execute contracts, stipulating the conditions for the conjugal
partnership with regard to present and future property, without any other
limitations than those mentioned in this Code
"In the absence of contracts relating to property it shall be understood that the
marriage has been contracted under the system of legal conjugal partnership.

"Section 1268. In the contracts referred to in the preceding section the

contracting parties can not stipulate anything contrary to law or morality, nor
humiliating to the authority within the family pertaining respectively to the
future spouses.
"All stipulations not in accordance with the provisions of this section shall be
considered void."